The Impact of Digitalization on the Business Model of German Retail Banks

Abstract: In recent years, digitalization influenced various industries, including retail banks. It can be observed that retail banks face new challenges such as changing customer demands and expectations. At the same time, the industry is disrupted by new competitors, such as Financial Technology companies and large technology enterprises. The ongoing low-interest environment risks the profitability of banks. These drastic changes make it interesting to examine in detail how digitalization influences the business model of retail banks in the German market. A multiple case study was conducted to gain empirical data. The aim of the case study was to receive information on digitalization about German retail banks. The sample was chosen to represent a cross section of the German three pillar banking system. All interviewees are well acquainted with digitalization and strategy. In order to analyze the empirical findings Osterwalder's Business Model Canvas was used. The findings derived from the case study indicate that banks certainly need to adjust their business model to cope with the challenges of digitalization. Digitalization influences all elements of the business model of retail banks. The dimensions affected the most are customer interface and internal processes. Retail banks have to approach those two aspects in order to keep up with the previously mentioned disruptive forces. Although the focus may be on those two aspects, retail banks ultimately should change holistically and take all levels of the organization into consideration when adapting their business model. Banks need to develop towards being a technical enterprise